Potential effect of AfCFTA agreement on AFRICAN-CHINA trade relations: evidence from single market partial equilibrium simulation tool (SMART) model

Purpose This paper aims to examine the trade diversion effect of AFCFTA in two largest economies in the continent (Nigeria and South Africa) and compared trade diversion effect with other trading partners. There is evidence of trade diversion effect of AFCFTA trade policy on African–China trade relations both in South Africa and Nigeria. Design/methodology/approach This study empirically investigates the potential effect of AFCFTA on Chinese trade with African countries in a Single Market Partial Equilibrium Simulation Tool (WITS-SMART) Model. WITS-SMART is partial equilibrium analysis which implies that the analysis only considers the effects of a given policy action in the market(s) that are directly affected. Findings The conclusion from this study is that based on the volume of trade between African countries and China the estimated trade diversion of 1.2 million USD for South Africa and 1.1 million USD for Nigeria in 20 top products is considerably low and may not be of any significant consequence to alter the trajectory of African–China trade relations. Despite this, it is pertinent for each country to identify the affected products involve in trade diversion and design strategies to create credible alternatives to minimize the potential effect. Originality/value Many studies have examined the impact of AfCFTA on African economy without examining the potential trade diversion of the policy. This study expands the focus of AfCFTA discourse beyond the immediate African economy by investigating the potential trade diversion of this new trade policy with the African largest trade partners.